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What Happened to Collective Bargaining During the Great Recession?

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What Happened to Collective Bargaining During the Great Recession? A Service of Leibniz-Informationszentrum econstor Wirtschaft Leibniz Information Centre Make Your Publications Visible. zbw for Economics Visser, Jelle Article What happened to collective bargaining during the great recession? IZA Journal of Labor Policy Provided in Cooperation with: IZA – Institute of Labor Economics Suggested Citation: Visser, Jelle (2016) : What happened to collective bargaining during the great recession?, IZA Journal of Labor Policy, ISSN 2193-9004, Springer, Heidelberg, Vol. 5, Iss. 9, pp. 1-35, http://dx.doi.org/10.1186/s40173-016-0061-1 This Version is available at: http://hdl.handle.net/10419/154731 Standard-Nutzungsbedingungen: Terms of use: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Documents in EconStor may be saved and copied for your Zwecken und zum Privatgebrauch gespeichert und kopiert werden. personal and scholarly purposes. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle You are not to copy documents for public or commercial Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich purposes, to exhibit the documents publicly, to make them machen, vertreiben oder anderweitig nutzen. publicly available on the internet, or to distribute or otherwise use the documents in public. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, If the documents have been made available under an Open gelten abweichend von diesen Nutzungsbedingungen die in der dort Content Licence (especially Creative Commons Licences), you genannten Lizenz gewährten Nutzungsrechte. may exercise further usage rights as specified in the indicated licence. http://creativecommons.org/licenses/by/4.0/ www.econstor.eu Visser IZA Journal of Labor Policy (2016) 5:9 DOI 10.1186/s40173-016-0061-1 ORIGINAL ARTICLE Open Access What happened to collective bargaining during the great recession? Jelle Visser1,2 Correspondence: [email protected] 1Amsterdam Institute for Advanced Abstract Labour Studies (AIAS), P.O. Box 94025, Amsterdam, GA 1090, the Collective bargaining over labour conditions between unions and employers is a Netherlands key labour market institution in democratic societies, guaranteed by international and 2Bremen International Graduate national law. Its coverage, organization and impact have varied over time and across School for the Social Sciences ’ (BIGSSS), P.O. Box 330404, Bremen countries. Inclusive bargaining, conducted by employers associations with a mandate 29344, Germany to bargain, and supported by the state, received a strong impulse during the interwar Depression. In the Great Recession a more exclusive version based on enterprise bargaining appears to have been favoured by governments and international agencies. How this relates to changes in bargaining coverage, multi-employer and multi-level bargaining, rules on extension and opening clauses is the subject of this paper, which surveys developments in 38 OECD and EU countries. A distinction is made between long-term and crisis-related changes, and between regulatory and non-regulatory changes during the Great Recession. JEL classification: Collective bargaining (J520), Labour-Management Relations (J530), Trade Unions (J510), Public Policy (J580) “I regard the growth of wage bargaining as essential. I approve minimum wage and hours regulation.” (John Maynard Keynes, 1-2-1938, letter on recovery policies from the Great Depression to President Roosevelt) 1 Introduction Collective bargaining1 involves a process of negotiation between trade unions and em- ployers or employers’ organizations to determine terms and conditions of employment. Together with the right to organize, collective bargaining is a fundamental principle and right at work, recognized by the international community. The Right to Organize and Collective Bargaining Convention, 1949 (No. 98) is one of the eight fundamental Conventions of the International Labour Organization (ILO). It guarantees collective bargaining as a voluntary process between independent and autonomous parties, and calls on governments to take “measures appropriate to national conditions […]to encourage and promote the full development and utilisation of machinery for volun- tary negotiation between employers or employers’ organisations and workers’ organisa- tions, with a view to the regulation of terms and conditions of employment by means of collective agreements’ (art 4). © 2016 Visser. Open Access This article is distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license, and indicate if changes were made. Visser IZA Journal of Labor Policy (2016) 5:9 Page 2 of 35 For workers, collective bargaining has a protective function - ensuring adequate pay, establishing limits on daily and weekly working time, and regulating other working conditions for those with weak individual negotiating power; a voice or participation function - the collective expression of grievances and participation in the success of the enterprise; and a distributive function - securing a fair share of the benefits of training, technology and productivity growth. For employers, collective bargaining has a key conflict management function - it provides a process for resolving disputes of interest. Managerial control tends to be more acceptable and effective when legitimised through joint rules (Flanders 1968). Collective agreements and wage regulations like a mandatory minimum wage put a floor in the labour market and thus limit cutthroat competition. This is the aspect defended by Keynes in the quotation above. Stabilizing wages reduces uncertainty about future costs and prices and can thus contribute to raising business and human capital investment decisions, which depend strongly on expectations. Collective bargaining, when sufficiently inclusive and coordinated, offers a mechanism for responsible wage setting, with outcomes that are compatible with price stability and low unemployment (Aidt and Tzannatos 2008; Flanagan 1999; OECD 2006; Traxler and Brandl 2012). Moreover, collective bargaining relieves the state from the complex task of setting standards and solving coordination problems in an area marred with conflicts and risks of non-compliance. It provides the possibility to tailor regulations to the circumstances in an enterprise or industry. In many countries and in EU law it is, moreover, possible to derogate by collective agreement from legal minimum stan- dards on for instance working hours, employment contracting and employee infor- mation and consultation in the enterprise. Compared to individual bargaining or unilateral pay determination, collective bargaining is associated with higher earnings, more security for employees and more earnings equality. In the literature a gap between union and non-union wages, or more properly specified between workers covered and not covered by collective agreements, of 4 (Norway) to 20 percent (Canada) has been reported (Hartog et al. 2002). A study based on ISSP survey data for 1995–99 covering 17 countries found a union or collective bargaining ‘mark up’ varying from less than 1 percent, negative or insignificant in Sweden, Italy or the Netherlands, 4 percent in Germany, 7 percent in Norway and Spain, rising to more than 20 percent in Japan (Blanchflower and Bryson 2003). A recent study of German wage data found that the gap between the average wages of covered and uncovered workers had risen from 8 to 19 percent between 1999 and 2010, or from 1 to 10 percent if controlled for firm size. The authors concluded that the decline of collective bargaining in Germany in the past two decades - with the coverage rate decreas- ing from over 80 to under 60 percent - hascontributedmoretorisingwagein- equality than international trade (Felbermayr et al. 2014). Addison et al. (2014), using a different methodology and controlling for employee heterogeneity, report asmaller‘wage gap’ in Germany of 3–4 percent during the first half of the 2000s. Their analysis shows that in a period of general standstill in wages, workers whose firms abandoned the sectoral agreement experienced a wage loss, albeit decreasing over time, whereas workers whose firms joined the sectoral agreement enjoyed a slightly increasing wage gain. Visser IZA Journal of Labor Policy (2016) 5:9 Page 3 of 35 Across countries, there is a strong negative association between bargaining coverage and wage inequality measured by the P1/P10 earnings ratio. Coverage accounts for 50 percent of the variance in wage inequality across the 32 OECD member states (Visser et al. 2015). If rising inequality has a negative impact on growth (IMF 2014; OECD 2014), then international and national policy makers should think twice before weaken- ing the institutions that underpin inclusive and coordinated collective bargaining. Of these institutions, multi-employer bargaining above the level of single firms is the most important. The level of bargaining accounts for 70 percent of the cross-national variance in bargaining coverage in a sample of 48 countries (Visser et al. 2015). In this paper I examine what happened to collective bargaining during the Great Recession, placing the development of the past six years in a longer trend. I focus on developments in three interrelated
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